The New Zealand dollar fell across the board today as trade data showed the country racked up a record deficit in August.
The massive $1.1 billion trade deficit in August was well above economists' forecasts of a $834 million trade deficit for the month. It pushed the annual trade deficit to $5.82 billion from $3.8 billion the previous year.
The announcement triggered a fall for the New Zealand dollar against most major currencies. By 5pm today it had slipped to US68.19c, from US68.76c at the same time yesterday.
BNZ currency strategist Sue Trinh said today's trade deficit, combined with last week's current account blow out was likely to see the Reserve Bank remain hawkish, with any easing from the official cash rate's current 6.75 percent not likely any time soon.
The kiwi was put under further pressure as indications grew of further rate hikes in the United States. Kansas City Federal President Thomas Hoenig, echoing Chicago Fed President Michael Moskow, said the US economy was in good shape despite hurricanes Katrina and Rita, which indicated more room for monetary policy tightening.
US dollar firmed across board, hitting two-month highs against both the yen and sterling .
But traders said continued demand for New Zealand dollar-denominated bonds was helping to underpin the kiwi to some extent and preventing bigger falls. There were $200m in eurobonds issued on Monday, bringing issuance for the month so far to $1.6b.
Other domestic data out this week includes the second quarter gross domestic product on Thursday.
Economists forecasting a median 0.8 percent growth on first quarter levels, and a 2.3 percent rise on the same time last year.
The following are Reuters currency rates:
NZ dlr US68.19c US68.76c
NZ dlr/Aust dlr A90.35c A90.70c
NZ dlr/euro 0.5673 0.5710
NZ dlr/yen 76.86 77.22
NZ dlr/stg 38.52p 38.72p
NZ TWI 69.30 69.74
Australian dollar US75.46c US75.79c
Euro/US dollar US1.2023 US1.2040
US dollar/yen 112.71 112.33
- NZPA
<EM>Currency:</EM> Kiwi hit by big trade deficit
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